Oilfield services giant Schlumberger Ltd. on July 24 outlined plans for deeper spending cuts after recording a $3.7 billion charge and a second straight quarterly loss on thousands of job cuts and a pipeline outage in Ecuador.
The large loss capped second-quarter reports from U.S. oilfield services providers that laid bare the damage wreaked by the coronavirus crisis. Producers cut spending about 40% this year as energy prices and demand sank on pandemic-related shutdowns.
Schlumberger has cut some 21,000 jobs, a fifth of its workforce, amid the steep drop in activity. Second quarter charges included $1.02 billion for severance costs, $977 million for asset impairments, and $730 million on Latin America projects, where a landslide disrupted a major customer.
Although crude prices have recovered from the historic declines in March and April, they are down around 33% for the year. Schlumberger plans to cut another $300 million from this year's spending, bringing total cuts to a 45% decrease from last year.
A COVID-19 resurgence could upset the company's outlook for a near-term normalization of oil prices, CEO Olivier Le Peuch said in a statement. He did not offer an earnings outlook for the rest of the year.
Schlumberger, which is continuing to restructure to adjust to the price crash, said North American revenue fell to $1.18 billion in the second quarter, less than half of what it was a year earlier, with only slightly better conditions expected in the current quarter.
Conditions are set "for a modest frac completion activity increase in North America, though from a very low base," Le Peuch said, referring to work to complete shale oil wells.
Schlumberger stock was down slightly at $19.23 per share in early trading on the New York Stock Exchange. Wall Street praised the spending cuts.
"Hefty cost reduction efforts drove much healthier than anticipated [adjusted] earnings results," wrote Tudor, Pickering, Holt & Co. analysts in a note.
The world's largest oilfield services provider reported a net loss of $3.43 billion, or $2.47 per share, for the second quarter, compared with a profit of $492 million, or 35 cents per share, a year earlier.
Excluding charges, the company earned 5 cents per share.
Recommended Reading
E&P Highlights: Dec. 30, 2024
2024-12-30 - Here’s a roundup of the latest E&P headlines, including a substantial decline in methane emissions from the Permian Basin and progress toward a final investment decision on Energy Transfer’s Lake Charles LNG project.
EY: Three Themes That Will Drive Transformational M&A in 2025
2024-12-19 - Prices, consolidation and financial firepower will push deals forward, says EY.
E&P Highlights: Dec. 16, 2024
2024-12-16 - Here’s a roundup of the latest E&P headlines, including a pair of contracts awarded offshore Brazil, development progress in the Tishomingo Field in Oklahoma and a partnership that will deploy advanced electric simul-frac fleets across the Permian Basin.
E&Ps Pivot from the Pricey Permian
2025-02-01 - SM Energy, Ovintiv and Devon Energy were rumored to be hunting for Permian M&A—but they ultimately inked deals in cheaper basins. Experts say it’s a trend to watch as producers shrug off high Permian prices for runway in the Williston, Eagle Ford, the Uinta and the Montney.
Winter Storm Snarls Gulf Coast LNG Traffic, Boosts NatGas Use
2025-01-22 - A winter storm along the Gulf Coast had ERCOT under strain and ports waiting out freezing temperatures before reopening.